Transcript

A year ago, the world was slowly coming to terms with Donald Trump's election victory. Yet markets were more positive, seeing Mr. Trump as "a good thing" for the US economy and for the dollar because they assumed inflation would surge thanks to infrastructure spending and tax cuts. And so the dollar soared enough for some forex analysts to make some bold forecasts, such as the greenback being worth as much as Y135 or reaching parity with the euro by the end of 2017.

The dollar has, instead, gone the other way. None of the Trump agenda has happened, at least, so far. And for those who lost a fortune on those dollar bets, the year has left them with one long psychological scar. That scar is healing slowly. There have been the occasional glimpse of a dollar revival in recent weeks as hopes of tax reform in the US rise.

But investors have learned their lesson, and they are at best, sceptical about this US administration. Even if reforms happened, say analysts, would a corporate tax cut actually lift US business investment? Or is it too late in the economic cycle to put any of these profits to work? Besides, is the idea of a Trump-driven fiscal stimulus such a big deal anymore?

"The US economy is humming along nicely," says one asset manager, "and the S&P 500 is maturing. Has Trump had anything to do with these? Not much," he says. Investors need to start thinking, all over again, about the dollar. After all the, case for a rally is, at the least, plausible if not downright persuasive. US unemployment is at its lowest in 17 years, laying the groundwork for wages growth acceleration and the long expected inflation push.

But the world has moved on. Global growth looks more embedded in than a year ago making the case for investing in emerging markets attractive. While the start of European Central Bank tapering, albeit slowly, in light of impressive eurozone data, makes the argument for buying the euro perhaps even more compelling.

And wouldn't investors be reluctant to take punts on US rate hikes while the Federal Reserve awaits the arrival of its new chair. A dollar rally is perfectly feasible, but it will happen despite Donald Trump rather than because of him.